Upper Echelons Theory

Upper Echelons Theory is the idea that top executives view their situations through their own highly personalized lenses. These individualized construals of strategic situations arise because of differences among executives in their experiences, values, personalities and other human factors. Using the upper echelons perspective, researchers have examined the effects of top management team (TMT) composition and processes on organizational outcomes, as well as the influences of chief executive officer (CEO) characteristics on company strategy and performance. Studies have confirmed the basic logic of upper echelons theory (comprehensively reviewed in Finkelstein et al. Strategic leadership: theory and research on executives, top management teams, and boards. Oxford University Press, New York, 2009), pointing to the conclusion that if we want to understand strategy we must understand strategists.[1]

See Also

Upper Echelons Theory is a theory in organizational psychology and management that suggests that the characteristics of an organization's top executives can partially predict its outcomes. To gain a broad perspective on the factors influencing organizational leadership and performance and how Upper Echelons Theory fits into the broader field of management and organizational studies, please refer to the following topics: leadership, organizational behavior, decision-making, and strategic management.

  • Leadership Theories: Overview of various leadership theories, such as transformational leadership, transactional leadership, servant leadership, etc., which explore different aspects of leadership behavior and effectiveness.
  • Organizational Behavior: A field of study that investigates the impact that individuals, groups, and structures have on behavior within organizations to apply such knowledge toward improving an organization's effectiveness.
  • Decision-Making Processes in Organizations: The mechanisms and strategies through which organizations make decisions, including individual and group decision-making processes.
  • Strategic Management: The management of an organization's resources to achieve its goals and objectives, including formulating and implementing strategies.
  • Board Composition and Corporate Governance: Examines the impact of the composition of a company's board of directors on corporate governance and strategic decisions.
  • Diversity in Leadership: The study of how diversity among leaders (e.g., gender, ethnicity, age) affects organizational practices and performance.
  • Executive Compensation: The analysis of how top executives' pay and incentives influence their behavior and organizational outcomes.
  • Human Capital Theory: The theory that organizations and individuals can invest in human capital (through education, training, and experience) to increase productivity and outcomes.
  • CEO Succession Planning: Identifying and developing new leaders who can replace old leaders when they leave, retire, or die.
  • Psychological Traits of Leaders: Exploration of how psychological traits such as personality, values, and cognitive styles of leaders affect organizational decisions and leadership effectiveness.
  • Agency Theory: A theory explaining the relationship between principals (shareholders) and agents (executives) in business, and how it can lead to conflicts of interest.
  • Contingency Theories of Leadership: Theories suggesting that the effectiveness of a leadership style can depend on the context, such as the nature of the task, the work environment, and the characteristics of the followers.
  • Theory E and Theory O
  • Theory X Theory Y
  • Theory Z
  • Theory of Constraints
  • Theory of Inventive Problem Solving
  • Theory of Mechanistic and Organic Systems
  • Theory of Planned Behavior
  • Theory of Reasoned Action


  1. Defining Upper Echelons Theory Donald C. Hambrick